Europe’s sick farmer

The sight of French farmers blocking roads, torching tires and dumping their produce in the streets is a staple of French life — on par with the Tour de France and jet flyovers during the Bastille Day military parade.

But the displays of outrage this summer point to more than just bad humor among farmers. Insiders warn that a support system made up of price controls, European Union subsidies and state aid, which has kept swathes of French agriculture in business for decades, is unraveling.

Unless France reforms agriculture in depth, farmers, meat purchasers and analysts say that some sectors — notably breeders — are set to go the way of coal mining, and disappear.

“The entire breeding sector, from pork to beef to milk producers, faces a huge competitiveness challenge,” Pascal Viné, the general delegate of the Coop de France group of agricultural firms, told POLITICO. “We’ve reached a point where we can no longer play for time and hope that prices will pick up.”

The latest crisis is partly explained by European Union economic sanctions on Russia, a huge export market for EU meat that has largely been shut off to farmers. Unable to sell to the east, farmers have flooded the European market with cheap meat products to drain supply.

While French industrial purchasers normally agree to absorb a set volume of local production at controlled prices agreed during roundtables, this time some of them balked over the huge difference between the cost of French meat and products from Germany or Spain — around 30 euro cents per kilo.

Many French farmers blame other European countries for causing their woes by overproducing meat and selling it too cheaply.

Some complained that buying French meat at inflated prices would put them at a serious economic disadvantage. The refusal of just two moderately sized groups, Bigard and Cooperl, to buy a certain volume of pork at an agreed price of €1.40 per kilo was enough to upset the tightly-controlled system, shutting down the Brittany pork product exchange for eight days.

Pig farmers reacted with wildcat protests, demanding immediate government intervention. On Tuesday, Agriculture Minister Stephane Le Foll, a close ally of President François Hollande, brokered a deal to reopen the exchange and kick-start sales near the agreed price, after other purchasers agreed to pick up what Bigard and Cooperl still refused to buy.

But prices quickly slipped below €1.40, and some 30,000 pigs — about half the overhang — remained unsold as of Tuesday evening. Hinting at his own government’s inability to address the price issue, Le Foll — who is appreciated by farmers for his gruff manner and track record handling previous crises — said last week that the only solution was to harmonize prices between EU states.

“If we could find a price compatible with the Spanish, German or British systems, we could talk,” Agence-France Presse quoted him as saying at a news conference. “Today, we are far from being able to harmonize our prices. Europe is not getting organized quickly enough.”

Like Le Foll, many French farmers blame other European countries for causing their woes by overproducing meat and selling it too cheaply. Catherine Laillé, president of the national pig breeders organisation, agrees with that diagnosis, but she also blames the government for failing to address the mature sow in the room: excessive production prices in France.

“If you drive around the French south you don’t see any cows anymore, or any pigs, or any animals raised for meat” — Catherine Laillé, pig breeder.

Indeed, over the past decade, French breeders have fallen far behind their EU neighbors in price competitiveness.

While France boasts vast arable lands and French farmers are the top beneficiary of European farming subsidies via the Common Agricultural Pact — which Paris has defended for decades — its farmers face much higher production costs than German or Spanish farmers, notably due to higher social welfare charges and taxes. They also have to follow sanitary, environmental and labeling standards that are often more stringent than what is required by EU law.

The result is that the total volume of pork produced in France has dropped steadily over the past few years — to 13.3 million heads in 2014 from 15 million in 2006, according to FranceAgriMer, a government-funded body that studies agriculture.

“I think he [Le Foll] hasn’t understood that unless we change the structure of costs in the breeding sector, it’s going to die out,” Laillé, who keeps 110 pigs in the western Loire Atlantique region, told POLITICO. “The government needs to act on the social charges, which must be harmonized across the European Union.”

Laillé and other French farmers want the government to press other European capitals to impose controls on pricing and production to even out the differences. Le Foll will try to obtain guarantees on September 7, when he meets counterparts from several EU farming nations in Brussels at talks called by France.

But the chances of France winning a major regulatory victory to control pricing and production across the bloc appear limited, because France is effectively the odd one out among producers of cheap meat. Other states have lowered their meat production costs drastically through a variety of means — from modernized breeding and slaughtering to cheap labor by migrant workers.

“There is an enormous amount of work to be done in the sector,” said Viné. “France needs to take a hard look at how we handle social welfare charges, taxes and regulations.”

Laillé said that she had borrowed €20,000 from a bank to cover operating costs at her farm while she waited for the price conflict to be resolved. The size of her operation and years of experience would allow her to pay back the money and stay in business. But, she said that other, less resilient farms were bound to go under.

“If you drive around the French south you don’t see any cows anymore, or any pigs, or any animals raised for meat,” she said. “All of that is going down the drain.”

ExLiberal

anonymous

@ExLiberal, the article made it clear that higher environmental standards and fewer minimum wage jobs were an issue. If that is inefficiency we need a lot more inefficiency in Europe,

Posted on 8/19/15 | 5:01 PM CEST

ExLiberal

Socialism fails.
Again.
When will people learn????????

Posted on 8/19/15 | 8:57 PM CEST

James

I thought the title was referring to the absence of ethics in the farmer who is cruelly crowding those piglets together. Literally on top of each other.

Posted on 8/19/15 | 9:01 PM CEST

Gert

@anonymous: higher environmental standards and fewer minimum wage jobs are only part of the problem, not the complete problem. As the article also mentioned (and already known for a long time), French agriculturalists are the top beneficiaries of European subsidies for decades already.
As for the environmental standards and minimum wages, if France thinks the EU rules are inadequate, this can be discussed and decided democratically wit in the EU structures. If the French parliament unilaterally decides to apply stricter rules within France, they may or may not be free to do so, but not to block goods from other countries adhering to the EU standards. I am not a lawyer, but I would recommend the French farmers to fight the stricter rules within France at a European Court for disrupting competition. But they will probably not do so, since they know fully well that are not the only reasons.
As Ex Liberal states correctly: socialism fails again, and asks others to pay the bill. And as usually, they do this with violence and hijacking other people.

Posted on 8/20/15 | 10:17 AM CEST

alan.ritchie

As usual when the rest of the world is out of step with France the French assume that the rest of the world must change. If the French chose to have allegedly higher environmental standards & higher taxes/social welfare charges that is a matter entirely for them – as are the consequences.

Posted on 8/20/15 | 10:53 AM CEST

L_Dave

“The person who profits from this law will complain bitterly, defending his acquired rights. He will claim that the state is obligated to protected and encourage his particular industry; that this procedure enriches the state because the protected industry is thus able to spend more and to pay higher wages to the poor workingmen.”
“Do not listen to this sophistry by vested interests. The acceptance of these arguments will build legal plunder into a whole system. In fact, this has already occurred. The present-day delusion is an attempt to enrich everyone at the expense of everyone else; to make plunder universal under the pretense of organizing it.”

― Frédéric Bastiat, The Law

Posted on 8/20/15 | 2:12 PM CEST

Laura

How about if we stop eating the animals and start eating the plants. End of problem!

Posted on 8/20/15 | 2:42 PM CEST

Andrew Allison

This is a microcosm of the entire, and entirely uncompetitive, French economy. France is Greece writ very, very large.

Posted on 8/20/15 | 6:24 PM CEST

Muriel Strand, P.E.

well, really, the question is if we can afford ourselves without fossil fuels and mass production. seems to me we will all have to change.

Posted on 8/20/15 | 9:30 PM CEST

Ott

I am not willing to pay producers more for their inability to be more efficient. The solution if France is simple, consolidation and M&A.
The rest of Europe has done so and it has not hurt food security, in the contrary, it has lowered prices. Change is hard and change is sad but it is sometimes necessary.

Posted on 8/24/15 | 11:41 AM CEST

JR

Sanctioning Russia (and the inevitable response of a Russian boycott) backfired far beyond the European politicians thought was possible an excess of 5 to 10% of not exported products will cause a price fall of easy two or three times for the TOTAL production.
The French are not the only ones having these EU confrontational policy induced problems. The Germany, Belgium, Danmark, Netherlands and so on suffer from those EU sanctions policy too.